Transcript Agricultural marketing

Introduction to Rural
Marketing
Why should we do this course?

Agriculture’s share in GDP is going down, but, India still
lives in her villages

Urban markets are crowded and saturated

The understanding of “rural” is diffused and sometimes
confusing

Is “rural marketing” different from “urban marketing” ?
Objectives of Rural Marketing

Conceptual clarity about fundamental Rural
Marketing concepts: Rural and Rural Marketing.

Learn about evolution of Rural Marketing in
India

Comprehend the Rural Marketing process as
Rural Marketing Model

Comparative analysis of Rural vs. Urban
Marketing

Marketing strategies
Defining Rural India
Organisatio
n
NSSO
(Census)
Definition
Population density < 400 / Sq
Km
 75 percent of the male working
population is engaged in
agriculture
No Municipal corporation / board

Planning  Towns upto 15,000 population
Commissi are considered rural
on
Limitations
rural not
defined
Town
characteristics
not defined
Contd…
LG Electronics
All places other
than the 7 metros
Only clarifies what
are the cities
NABARD
All locations with a Village & town
population upto 10, characteristics not
000 considered “
defined
rural”
Sahara
Commercial
establishments
located in areas
servicing less than
1000 population
Population
characteristics
unknown
Source: The Rural Marketing Book- Text & Practice, Kashyap. P and Raut. S (
2007)
Rural Marketing

Planning and implementation
function for the rural areas.
of
marketing

It is a two way marketing process, which
encompasses the performance of business
activities that direct the flow of goods from urban
to rural areas (for manufactured goods) and viceversa (for agriculture produce) and also within
the rural areas (Gopalaswamy, 2005).
Contd…

It is a distinct specialization of marketing
discipline,
which
encompasses
customized
application of marketing tools and strategies to
understand the psyche of rural consumer in terms
of needs, tailoring the products to meet such
needs and effectively delivering them to enable
profitable exchange of goods and services to and
from the rural market.
Marketing perspective in Rural Market
Key Concepts
Marketer : one who seeks response to an
offer which he makes to a person
Consumer : a person who uses a product to
derive satisfaction
Demand : willingness to buy, supported by
ability to pay.
Competition :
Contd…
existence of actual and potential rival
companies, which manufacture perfect or close
substitute product offerings to attract consumers.
Generic – product vs. product
 Form – different products with similar benefits
 Industry – different companies with same
products
 Brand- brand vs. brands of same product

Types
Product
Generic
All durables and consumables
Form
All vehicles, 4 wheelers and 2 wheelers
Industry
Automobiles –passenger car industry
Brand
Maruti- 800
Goals of Marketing




Profitability- Revenue maximization, cost
minimization
Growth – sales growth,
product /market development
Market penetration
Diversification
Market standing – Innovation,
leadership,
consumer satisfaction
Image- Brand image, company image
Aspects to be considered to achieve the goals
Organizational structure : designed by function,
by territory, by market, by customer, by
project or by matrix
Leadership skills : provides vision and secures
creative follower ship and integrated
operation
Strategic management : Competition, market,
product and consumer.
Organizational structure
By function
M.D
G.M
Product
Finance
H.R
Marketing
Market research
Marketing planning
Advertising Promotions
Sales
Public relations
Organizational structure
By Territory
M.D
G.M
Product
Finance
H.R
Marketing
Western Region
Southern region
Central region
Eastern Region
Northern region
Organizational structure
By Product
M.D
G.M
Product
Finance
H.R
Marketing
Detergents/toiletries
Chemicals
Foods
Animal feed
Organizational structure
By markets
M.D
G.M
Product
Finance
H.R
Marketing
Domestic
Institution
Households
Government
Export
Organizational structure
By customers
M.D
G.M
Product
Finance
H.R
Marketing
Men wear
Women wear
Kids wear
Organizational structure
By project
M.D
G.M
Product
Finance
H.R
Marketing
Project A
Project B
Project C
Organizational structure
By matrix
M.D
G.M
Product
Finance
H.R
Advertising
Project A
Project B
Project C
Marketing
Market
Sales
research
Leadership skills
In the quest of good leadership
Leadership : clear theme
Structure
: suitable for operation and goal
Functional
efficiency : peoples skilled and trained
Coordination : coordination and interaction
Strategic Management
Marketers are in four battle situations

Competition : gaining victory over competitive
firms

Market: Operating through market life cycle

Product : evolving strategies through product
life cycle

Consumer: Tracking customers, value
expectations and satisfactions
Market life cycle :
market crystallization –a latent market
comes into light with consumer preferences
market expansion- grows with first
entrant and late comers
market fragmentation –attains maturity
due to intense competition
market consolidation
-during fragmentation one or two introduces new
product and will emerge as winners. Markets get
consolidated with few big players with stable market
shares
market dissolution
- market dissolves as the existing technology and
product becomes obsolete.
Product life cycle
stages
Strategy
Introduction
basic product, heavy sales
promotion selective distribution
Growth
Product extension, warranty
offer, penetration pricing,
moderate sales promotion
Contd…

Maturity
Diversify brands, competitive
pricing, intensive distribution,
moderate sales promotion
Decline
Phase out weak items, lower
price, selective distribution,
minimal sales promotion
Challenges to Indian Marketer

The gradual opening up of Indian economy to
foreign companies

The increasing number of cross-border corporate
alliances

The growth of global brands in Indian Markets

The rapid dissemination of global life styles

The emergence of attractive rural markets
Rural India
A Promising Market place
India
Urban
28%
Rural
72%
India
Definitions

Rural and Urban Areas

The conceptual unit for urban areas is a
'town', whereas for the rural areas it is a
'village.' The classification of an area as an
urban unit in Census of India 2001 is based
on the following definition:
1. All places declared by the state
government under a statute as a
municipality, corporation, cantonment board
or notified town area committee, etc.
2. All other places which simultaneously
satisfy or are expected to satisfy the
following criteria:
•A minimum population of 5,000
•At least 75 per cent of the male working
population engaged in non-agricultural
economic pursuits: and
•A density of population of at least 400 per
square kilometer (1,000 per square mile)
3. Any area, which is not covered by the
definition of urban, is rural.
Demographic profile

Rural India is generating more than half of
national income.

41% of Indian middle class homes and 58% of
disposable income exist in rural India.

Income contribution of 55.6% to the national
income by rural population of 74.6 crore is higher
than urban India’s with 25.4 crore people
contributing 44.6%.
Contd…

75% of the households in the country had an electricity
connection. The majority of rural households are not
having electricity.

India’s infant mortality rate of 75 per thousand live
births is one of the highest in the world.

Access to potable water, health care, sanitation and
shelter are a far cry, particularly in the rural sector.
contd…

Largely working as farmers or agricultural workers

Have limited education, may well be illiterate
This leads to linear and simple thinking, abstract logic tends
to go over their heads

Either live in joint (extended) families or have only
recently formed nuclear families
The ground realities!
The Rural Consumer
Why rural?
1. Huge business opportunities…
Rural
consumers constitute about 72% of
India’s population
2. No single-national competitor
Marketers
have, so far, concentrated on
the top-end consumer
Therefore,
this segment is largely
dominated by proxy products and
local/regional/duplicate/fake brands
Who is the rural consumer?
Shopping behaviour

Buy small quantities - more frequently
 Unit price is critical, particularly as many of them are
daily-wage earners

Look for ‘acceptable performance’/ functional benefits /
paisa vasool paradigm (good in relation to current product)
at a reasonable price

“Tran creation” of packaging critical

Flash price of pack wherever feasible
Shopping behaviour

In their own way, good at arriving at a cost per
dose (or cost per month) equation: even if not
expressed mathematically


Make high-volume purchases at weekly village
markets


More sensitive and alert to ‘value’
Haats
Build personal acquaintance with
neighbourhood retailer


Often trust the retailer who does influence brand choice
Frequently get ‘credit’ from the retailer
Shopping behaviour

Word-of-mouth, very important and credible

Mass driven
 Buy products that are perceived to be
popular: the ‘bandwagon’ effect

Try to minimise their risk: tend to be stronger
creatures of habit
Shopping behaviour

High awareness of range of consumer brands
- but propensity to actually purchase premium
performance brands is low

Still influenced by popular idols/role models
such as movie stars, famous sportsmen, etc
Collectivism
(As opposed to individualistic)
Adhere
to prevailing social norms: the
community they live in is very important and
their behaviour is usually consistent with the
community’s shared beliefs and norms
Enjoy
social gatherings: women’s associations,
celebrations, events, etc
Collectivism
(As opposed to individualistic)

Spend a lot of their free time chatting and
gossiping with neighbors: both as a source of
entertainment and information

Tend to be suspicious about people outside
the community

Follow opinion leaders: school teachers, priests,
religious leaders, urbanized relatives, local
politicians, the village head
Other beliefs

Strong belief in ‘fate’ and ‘luck’, religion
and God

Active participation in religious activities

“Cleanliness is next to Godliness”
Rural India
Myths & Reality
Myth
One
family, one brand - there's one brand for
the whole household.
Rural
consumers aren't worth bothering about
since they buy loose, unbranded products
rather than the branded variety. In branded
they buy only inexpensive brands.
Reality
The
ORG study shows a high preference for
branded products. In 18 categories, branded
consumption accounts for 80% of sales.
eg: toilet soaps, washing powders, analgesics, safety
razor blades, toothpastes, shampoos, batteries, rubs and
balms, skin creams, toothpowders, toothbrushes,
antiseptic creams, antiseptic liquids, digestives, mosquito
repellants, shaving preparations, tube lights.
Reality
Penetration
of premium products is being
reported, even to the lowest socio-economic
classification. Although the percentages may
be very small, given the large universe, the
actual figures may be quite significant.
Reality
In
many categories, multiple-brand usage
is a fact. Rural households are not
completely homogeneous.
Unchanged characteristics
of rural consumers
Continued
existence of an oppressive and
rigid caste system, particularly in rural
areas
High
illiteracy levels: often incapable of
reading or pronouncing a brand name
E.g.
Lifebuoy is referred to as ‘the red soap’
Phases in Rural Marketing
Phase One( Pre 1960’s) :

Marketing rural products in rural and urban areas

Agricultural inputs in rural areas

“Agricultural marketing”

Farming methods were primitive and
mechanization was low

Markets unorganized
Phase Two ( 1960s to 1990s)

Green Revolution

Companies like Mahindra and Mahindra, Sri Ram
Fertilizers , Escorts and IFFCO emerge

Rural products were also marketed through
agencies like KVIC
Phase Three( 1990s to Present)

Demand for consumables and durables rise

Companies find growth in urban markets
stagnating or falling
Phased Evolution of Rural Marketing
Phas
e
Time period
Purpose
Major
Products
Source
Market
Target
Market
I
Since
independence
but before
Green
Revolution
Agricultural
Marketing
Agricultural
produce
Rural
Urban
II
Green
Revolution to
Preliberalisation
period
Marketing of
Agri-inputs
Agricultural
inputs
Urban
Rural
III
Postliberalisation
period in 20th
century
Rural
Marketing
21st century
Development
al Marketing
IV
Consumables
& durables for Urban &
consumption
Rural
& production
All Products
and Services
Urban &
Rural
Rural
Urban
&
Rural
Scope of Rural Marketing

Keenly debated topic

Definitions based on organisational/ institutional vision,
mission & goals

Need for a comprehensive and modular understanding

Rural Marketing is a “ work in progress”

Multi – disciplinary approach is necessary for sharper
understanding
Transitions In Rural India
•Non –food, cash crops
•
Food Grain Crops
•
On land activities
•
Farm Activities
•Livestock & fisheries
•Manufacturing &
services
Rural Employment Patterns
Sector
Year – 1987 ( % share in
employment)
Year -2004 ( % share in
employment)
Agriculture
75
67
Transport &
Communication
2
8
Trade & Hotels
5
7
Construction
4
7
Manufacturing
7
8
Source: NSSO data, Mckinsey Global Institute Study, 2004-05
Rural India – Population Trends
1971
1981
1991
2001
548.2
683.3
848.3
1026.9
Rural
Population (in
million)
524.0
628.8
741.6
As a proportion
of total
population
76.7
74.3
72.2
Decadal
Variation
19.8
16.7
15.2
Total
Population (in
million)
Source: Census 2001
Rural Income Trends
Annual Income (
at 1998-99
prices)
Income Class
1998-99
( % Households)
2006-07
( % Households)
<= 35,000
Low
48
24
35,001- 70,000
Low Middle
35
46
70,001 – 1,05,000
Middle
10
18
1,05,0011,40,000
Upper Middle
4
6
> 1,40,000
High
3
6
Source: National Council for Applied Economic Research, 2006-07
Transactional Vs. Development Marketing
S.No.
Aspect
Transactional
1.
Concept
2
Role
Stimulating &
conversional
marketing
Catalytic &
transformation
agent
3.
Focus
Product-market fit
Social change
4.
Key-task
Product innovations &
communications
Social innovations
communication
5.
Nature
Commercial
Consumer
orientation
Development
Society
orientation,
Socio-cultural
S.No.
Aspect
6.
Offer
Transactional
Development
Products & services
Development
projects/schemes/
programs
7.
Target group
Buyers
Beneficiaries
& buyers
8.
Communication
Functional
Developmental
Profits
Customer satisfaction
Market development
Corporate Image
Brand image
9.
Goal
10. Time-Frame
Short-medium
11. Motivation Profit-motive
Business policy
Medium-Long
Service-motive
Ideological/
Public policy
Rural Marketing Model
Research
Segment rural market
Study lifestyle of
rural population of different segments region
Develop profile of rural consumers
of different market segments
Define and prioritize their
needs in general terms
A
A
Develop specific need profile
for a product category in that region
Select target markets
Develop/Modify Marketing Mix
Implementation
Control
Factors Differentiating Rural Marketing
from Urban Marketing
Sr
.
List of Factors
1. Infrastructure Availability: electricity supply, media reach,
availability of finance facility, education level, roads,
connectivity, presence of organized markets; in rural market
is very different from that of urban markets.
2. Income Streams: The pattern of income generation in rural
areas based on agriculture is seasonal and highly unreliable
unlike the fixed monthly income in the urban areas. This
creates a consumption pattern, which is different from urban
one.
3. Lifestyle: The lifestyle and daily routine of consumers in two
markets is markedly different. This creates significantly
different profile of consumers for the same product in these
two markets.
Factors Differentiating Rural Marketing
from Urban Marketing
Sr
.
List of Factors
4.
Context: Because of variation of infrastructure and income
streams, the context in which an individual exists in rural areas
is very different from the one in urban areas. This creates
difference in nature and priorities of needs in two markets.
5.
Socio-cultural Background: Value system and thus perception
toward goods /services and consumption is different in two
markets
6.
Accessibility: The cost and logistics of accessing consumers in a
highly widespread and heterogeneous rural market are very
different from those involved in reaching urban consumers,
concentrated in good number in single location. Thus,
demanding two different types of approaches.
Factors Differentiating Rural Marketing from
Urban Marketing
Sr.
List of Factors
7. Media Reach & Habits: The reach of media vehicles and the
media habits are very different in rural and urban markets.
Requiring very different type of promotional strategy in
these two markets.
8. Nature of Competition: The nature and intensity of
competition amongst the brands is very different in the two
markets.
9. Consumer Behaviour: The response of consumers to
marketing stimuli is very different in two markets. Rural
consumer’s behaviour is quite different from that of urban
buyer’s behaviour.
DISTINCTION BETWEEN RURAL AND URBAN
Societies
Rural Society
Culture
Conservative approach
Traditional outlook
Urban Society
Progressive & reasonable
Scientific outlook
Social perceptions
Family controls the society
Occupation
Depend on nature
Jobs hereditary & custom oriented
Economy & economic
institutions controls
Depend on man madeconditions
Modern & result oriented
Specialization
No specialization
No division of labour ,
urban is full of specialties
division of labour
Mobility in Society
No change in occupation, religion, place
all will change
Social tolerance
Social changes not tolerated
Changes very slow
Family is dominant
Joint family is norm
Individuals depend economically on family
changes frequently
very fast
Individuality is dominant
Single family is norm
Individuals live by themselves
Social relationship
Rural society based on
cooperation & Relationship
these aspects are
absent
Social change
No competition
Traditional values
Large competition
no traditional values
Social uniformity
Due to castes occupations are fixed
Status of women
No independent status
Considered sub servant & given
low status
jobs will change
irrespective of caste
mostly independent
equal status
Social stratification
Society divided on traditional
system
divided on basis of
economic social political
Density of population
Small population
densely populated
Size of society
Small with one occupation
large with many occupation
Social disorganization
Agencies to control society
no agency
Diagnosis of the failures
in order to identify the gaps to be bridged by
government & development agencies
Low priority to agriculture :
Importance to agriculture in total economy has declined
but it still maintain first with other sectors like
manufacturing, transport, banking and administration.
Subsistence orientation of agriculture
Increasing input cost made agriculture less and less
profit. This lead to inefficient use of land & water
resources. Hence farmers have low incomes & suffer
from unemployment & under employment.
Contd…
Failure of land reforms:
Land reforms both in the form of redistribution of land in
favor of the poor and tenancy reforms are largely failures,
except in Kerala and West Bengal.
Shrinking of operational land due to splitting of families.
Inadequate food supplies:
Although India is self-sufficient in food grains at the national
level, it continues to be inadequate at the household
level.
Contd…
Slow down of rural Industrialization:
Even though Government took enough steps to improve
cottage industries, the allocation of fund to village
industries is not sufficient.
Slow growth of infrastructure:
About 40% of villages are without proper roads, 1.8 lakhs
villages do not have primary schools, lack of waters and
health centers
contd…
Inadequate inputs :
The research and extension systems are very weak and
suffer from lack of adequate funds and organizational
weaknesses. There is no direct link between scientists,
extension personnel and farmers.
Information about the technology and marketing of farmers
are yet to reach the farmers.
Policy Interventions

Agriculture needs proper attention

Focus has been more on cropping system research
than farming system research

There should be effective linkage between
agricultural research system, administration and
farmers to develop and transfer technologies
suited to local conditions.
contd…

Higher investment in farm operations and related
rural infrastructure is necessary condition for
speedier farm growth.

A shift in policy to focus on production, especially
in dry lands

Credit and insurance systems need to be
revitalized to respond to the changing needs